On Thursday, BMO Capital Markets adjusted its outlook on CGI Group (NYSE:GIB) Inc (GIB/A:CN) (NYSE: GIB), reducing the price target from Cdn$170.00 to Cdn$160.00, while continuing to endorse the stock with an Outperform rating. The revision follows the company's second-quarter financial results for the year 2024, which showed revenues slightly below expectations, but earnings per share (EPS) slightly above.
The analyst at BMO Capital pointed to CGI Group's effective cost control measures and an increasing mix of intellectual property (IP) as key factors supporting strong profit margins. These elements are seen as helping to mitigate the impact of slower organic revenue growth on the company's EPS.
CGI Group's valuation is still considered attractive when compared to its peers, according to the analyst. This perspective is based on the company's earnings stability, successful margin management, and a revenue mix that is viewed as more defensive. The latter is attributed to a larger proportion of the company's business coming from the public sector, managed services, and intellectual property.
The analyst's comments further underline the belief that CGI Group's financial performance is resilient. The company's strategic focus on sectors that provide steady revenue, combined with its ability to maintain margins, contributes to its appeal as an investment relative to other companies in the sector.
Investors in CGI Group can take note of the updated price target as they monitor the stock's performance in the market. The Outperform rating suggests that BMO Capital Markets expects CGI Group to outpace the average market return within its industry over a set time horizon.
InvestingPro Insights
For those closely following CGI Group Inc (NYSE: GIB), recent data from InvestingPro offers additional context to BMO Capital Markets' revised outlook. The company's market capitalization stands at a robust 23.49 billion USD, reflecting its significant presence in the IT services industry. Despite recent market fluctuations, CGI Group's revenue in the last twelve months as of Q2 2024 has grown by 5.87%, indicating a steady business expansion.
InvestingPro Tips highlight that CGI Group is trading at a high P/E ratio of 19.52, which may suggest a premium valuation relative to near-term earnings growth. Additionally, the company's stock is noted for its low price volatility, which aligns with the analyst's view of CGI Group's defensive revenue mix and earnings stability. Notably, CGI Group has been profitable over the last twelve months and is predicted by analysts to continue this trend into the current year.
While CGI Group does not pay dividends, the company's ability to generate consistent profits and maintain cost controls can be appealing for investors seeking stable growth opportunities. For more insights, there are additional InvestingPro Tips available for CGI Group at https://www.investing.com/pro/GIB. Use the coupon code PRONEWS24 to get an extra 10% off a yearly or biyearly Pro and Pro+ subscription, and explore beyond the two tips provided here to discover all the valuable analysis that InvestingPro has to offer.
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